Cabot Prime Pro Week Ending April 28, 2017
Cabot Weekly Review
In this week’s video review, Paul Goodwin looks at the bull market and likes what he sees. With the buyers in charge after a seven-week flat patch, it’s time for growth investors to be putting money to work. Paul looks at a couple of popular strategies, including the FANG and the BAT. But the most important thing is that you should be getting your cash off the sidelines. The second most important thing is that it’s earnings season, and you should know when your companies will be reporting and have a plan for how you will react if the news is bad and the stock heads south.
Cabot Growth Investor
Other Stocks of Interest April 28: Follow ups to stocks featured November 22, 2016 (issue 1356) to April 26, 2017 (issue 1366). Since they’re not in the Model Portfolio, you don’t see them followed on a regular basis. However, we are monitoring these stocks, and this listing gives their current momentum status.
Bi-weekly Issue April 26: The market’s rally in recent days has turned our Cabot Tides positive, joining our Cabot Trend Lines and Two-Second Indicator. Because of that, we did some buying in a Special Bulletin last evening, which leaves us with around 19% in cash. Elsewhere in tonight’s issue, Mike writes about some confirming signs of the recent strength and the potential for the retail sector to provide some new leadership in the weeks ahead.
Special Bulletin April 25: The strength of the past couple of days has turned our Cabot Tides bullish, where it joins the Cabot Trend Lines and Two-Second Indicator. Thus, after a seven-week rest, it appears the market’s major uptrend is resuming and we want to put some new cash to work. Tonight, we’re taking half positions in Tesla (TSLA) and Universal Display (OLED), and returning Netflix (NFLX) to a Buy rating.
Cabot Top Ten Trader
Movers & Shakers Weekly Update April 28: It’s been a very good week for the market, with most indexes up anywhere from 1.5% to 3% since Monday morning and many stocks performing excellently. Buy ideas: LendingTree (TREE), Marriott Vacations (VAC), Netflix (NFLX), RingCentral (RNG) and Yum China (YUMC).
Weekly Issue April 24: This week’s Top Ten is heavy on solid growth ideas, which is good to see, and our Top Pick is Alibaba (BABA), a well-known firm that finally looks ready to take on the role of liquid leading stock.
Cabot Options Trader and Cabot Options Trader Pro
Note that the current week’s Weekly Update, earnings updates, position updates and stocks on watch are posted on the website in the Market Update section, which is deleted each week.
Position Update April 27: Since we bought our Anheuser Busch (BUD) September 115 Calls yesterday, open interest has continued in BUD to over 27,000 May 120 Calls—in addition to the 28,000 May 115 Calls in open interest. These trades are extremely odd to Jacob and are raising all types of red flags.
Earnings Updates April 27: Updates on four stocks that report after the close today: Amazon (AMZN), Intel (INTC), Microsoft (MSFT) and Starbucks (SBUX).
Trade Alert April 26: Buy Anheuser Busch (BUD) September 115 Calls (exp. 9/15) for $4.70 or less.
Position Update April 26: The trader who bought Visa (V) May calls ahead of earnings has continued to sell out his position, but the stock still looks good, trading just $1 below its 52-week high, so Jacob is willing to give it a couple more days to see if the trader rolls into a new position.
Earnings Updates April 26: Jacob’s review on Bristol Myers (BMY) and Astra Zeneca (AZN) ahead of earnings.
Stocks on Watch April 25: Four of the six trades on Jacob’s watch list today are on recent laggards: Weatherford (WFT), Palo Alto Networks (PANW) , Chicago Bridge & Iron (CBI) and Teva Pharmaceuticals (TEVA).
Earnings Updates April 25: Fiat Chrysler (FCAU) and Twitter (TWTR) report earnings on 4/26 before the open. Here’s what the options market is pricing in for an expected move, the stock’s move on the last earnings event, Jacob’s thoughts on volatility/price of options and recent order flow.
Buy-Write: Buy Builders FirstSource (BLDR) Stock and Sell June 15 Calls (exp. 6/16) for $14.25 or less.
Trade Alert April 24: Exit Existing Position: Sell your Coca-Cola (KO) May 42 Calls for $1.38 or more.
Weekly Update April 24: The VIX closed the week at 14.63, down marginally on the week. One would have expected a sharper decline as the indexes tacked on gains. However, ahead of the French Presidential election, which was too close to call headed into the weekend, traders were bracing for potential volatility.
Cabot Undervalued Stocks Advisor
Special Bulletin April 28: Today’s Special Bulletin focuses on quarterly earnings reports from ExxonMobil (XOM), Johnson Controls (JCI), Royal Caribbean (RCL), Total S.A. (TOT) and Vertex Pharmaceuticals (VRTX). There are no rating changes.
Special Bulletin April 27: Updates on Dollar Tree (DLTR), XL Group (XL), Legg Mason (LM) and Royal Caribbean Cruises (RCL), including a rating change on DLTR to Hold because because there’s less than 10% upside to the stock between now and Crista’s 90 target price.
Special Bulletin April 26: Chipotle Mexican Grill (CMG) reported outstanding first-quarter results yesterday afternoon, with revenue of $1.07 billion vs. the consensus estimate of $1.05 billion. But it was the huge and unexpected earnings beat that brought lots of attention to the stock. CMG is up about 5% to 495 at 10 AM ET today, and Crista is moving the stock from Strong Buy to Hold.
Special Bulletin April 25: Updates on Whirlpool (WHR) and PulteGroup (PHM) following their earnings reports, plus updates on six other holdings: Blackstone Group (BX), Total (TOT), XL Group (XL), Chipotle Mexican Grill (CMG), H&R Block (HRB) and Thermon Group (THR).
Weekly Update April 24: It looks like we’re in for an up week in the stock market. Stocks are reacting well to election results in France, in which a moderate candidate took the lead, with an outsider standing in second place. Two ratings changes today: Boise Cascade (BCC) moves from Buy to Strong Buy, and Quanta Services (PWR) moves from Buy to Strong Buy.
Monthly Issue April 4: Today’s featured stocks include Johnson Controls (JCI), Vertex Pharmaceuticals (VRTX); and a new addition to the Growth & Income Portfolio, TiVo (TIVO). Johnson Controls (JCI) moves from Buy to Strong Buy.
Cabot Stock of the Week
Weekly Issue April 25: In choosing today’s stock, Tim deliberately looked for one that was not hitting new highs, a stock with limited downside. His pick, Snap Inc. (SNAP), came public recently to great fanfare but that has since cooled off and settled down to what he believes is a buyable bottom. Changes since last week: Berry Global (BERY) to Sell and Biogen (BIIB) to Hold.
Cabot Small-Cap Confidential
Weekly Update April 28: Tyler thinks it’s time to proceed with caution in terms of buying more of our cloud software stocks right now. These guys are going to have to deliver on revenue and earnings over the next two weeks, and given the recent run, the pressure is on. For this reason, he’s moving both Everbridge (EVBG) and Ooma (OOMA) to Hold until the companies report earnings.
Special Bulletin April 24: Tyler reiterates his Buy rating today on Aqua Metals (AQMS). What he wrote in his original research report remains true today—the big picture trends, the potential, and the risks.
Monthly Issue April 7: Aqua Metals (AQMS) is a $358 million market cap company trying to disrupt the $22 billion global lead recycling industry. There are no changes to the other stocks in the portfolio.
Cabot Emerging Markets Investor
Bi-weekly Update April 27: The Emerging Markets Timer is in great shape, as the iShares EM Fund is sitting well above its 25- and 50-day moving averages. We have no changes to the portfolio tonight.
Bi-weekly Issue April 20: Most of our recommended stocks are acting great, and our new recommendation, Yum China (YUMC), checks many of the boxes we look for when hunting for a long-term winner. It’s a dominant restaurant company in China, and the stock just got going after a few months of base-building. There are no changes in ratings today.
Cabot Benjamin Graham Value Investor
Weekly Update April 28: At about half way through earnings season, the results look good. Average sales gains for Roy’s 27 stocks that have reported thus far are 13%. Roy provides summaries for 17 companies that reported quarterly financial results or other noteworthy news during the past week.
Monthly Enterprising Issue April 13: This month, Roy introduces Tech Data (TECD), which holds great promise. After reporting stagnant results during the past several years, the company recently acquired assets that will boost sales and earnings this year and next.
Monthly Value Model Issue April 6: The allocation for the Cabot Value Model remains at Level 5, which calls for a mix of four stocks and 12 defensive positions. The Value Model adds two new stocks this month: Celgene (CELG) and Lowe’s Companies (LOW), while two stocks transition out of the Model: Danaher (DHR) and Home Depot (HD).
Cabot Dividend Investor
Monthly Issue April 26: Chloe adds large-cap industrial stock Cummins (CMI) to the Dividend Growth Tier, reviews her sales from the past week, and explains how to write covered calls.
Special Bulletin April 24: Today, Chloe is selling Schlumberger (SLB) and Mattel (MAT). MAT is trading slightly higher pre-market, so she’ll take advantage of the stability to sell shares today. SLB closed below its mental stop around 75 on Friday.
Wall Street’s Best Investments
Daily Alert April 28: Fidelity International Small Cap (FISMX) from Fidelity Monitor & Insight
Daily Alert April 27: Yum China (YUMC) from Cabot Emerging Markets Investor
Daily Alert April 26: Editas Medicine (EDIT) from Technology & Opportunity
Daily Alert April 25: Netflix (NFLX) from Canaccord Genuity Research
Daily Alert April 24: High Power International (HPJ) from Top Stocks Under $10
Monthly Issue April 12: Our contributors found ideas with great potential in just about every sector this month, and our Spotlight Stock is Hologic (HOLX), a company that has taken the lead in women’s healthcare, particularly in the diagnostic, surgical and medical-imaging products sectors.
Wall Streets Best Dividend Stocks
Daily Alert April 28: Chatham Lodging Trust (CLDT) from Forbes Dividend Investor
Daily Alert April 28: Sell Mattel (MAT) from Forbes Dividend Investor
Daily Alert April 27: Physicians Realty (DOC) from The Intelligent REIT Investor
Daily Alert April 26: Dine Equity (DIN) from The Turnaround Letter
Daily Alert April 25: Campbell Soup (CPB) from Wall Street Stock Forecaster
Daily Alert April 24: Carnival (CCL) from Cabot Dividend Investor
Daily Alert April 24: Sell J.M. Smucker (SJM) from Cabot Dividend Investor
Monthly Issue April 5: Contributors remain positive on a variety of industries, beginning with Spotlight Stock Verizon (VZ), a giant in the telecom sector that is poised to greatly benefit from cutting-edge tech developments like the mass-market adoption of the Internet of Things and the coming 5G rollout.
This Week’s Q&As
Cabot Growth Investor
Question: I noticed an old favorite of yours, GrubHub (GRUB), gapping up on earnings this week on big volume. Given the powerful move, do you see it as a Buy here?
Mike: It’s a good question with a “no, but” answer. So, first, no, I wouldn’t buy GRUB here because, while the stock had a terrific day on Thursday, it’s sort of stuck in no-man’s land right here—shares are obviously well off their lows, but are still shy of their February peak, not to mention their 2016 highs above 44.
That said, the “but” part is that, after a multi-month correction, such powerful earnings gaps can often change the stock’s picture. Thus, if you really want in, I’m not opposed to nibbling here and looking to average up should GRUB move higher. For my part, I’m putting on my radar screen and will be watching it (and other recent earnings winners) to see if they offer solid entry points.
Cabot Options Trader and Cabot Options Trader Pro
Question: What are your thoughts on Walt Disney (DIS)? I have 400 shares—is it worth looking at the longer term calls for Jan. 18?
Jacob: DIS has popped on and off my radar quite a bit in the last couple of months. The call buying explodes every couple of weeks, then dies down. If you’re looking for a January 2018 call, you could target the big trade made yesterday from my Daily Order Flow list: Buyer of 5,000 Walt Disney (DIS) January 120 Calls for $4.15 – Stock at 114.30
Question: Great Visa trade that you sent out to the members. Would like to know what you have in mind regarding MasterCard (MA) considering both AXP and V have beaten on each earnings? Any options or covered play here for MA?
Jacob: I’ve looked into MA options and there haven’t been any trades of any significance made in the past month, so its difficult for me to get a read on it and may pass on a position. That said, if I was bullish, I might Buy the July 115 Calls for around $3.80 or Buy the July 115/125 for around $3.20 or Buy stock and Sell the May 115 for $2.30.The day before earnings, email me again, and I’ll take another look to see how options traders have positioned themselves.
Question: Are you planning to hold Coca-Cola (KO) over earnings? I saw some bearish activity below.
Jacob: Not sure yet. Depends if I see more of that bearish activity in the coming days. (we closed half of our calls for a profit of 25%).
Cabot Undervalued Stocks Advisor
Question: How is Allergan (AGN) looking?
Crista: Allergan (AGN) has been quiet, trading between 235-250 since mid-February. I always view quiet periods of sideways trading as a bullish sign that the stock is preparing for a run-up in the near future.
Earnings projections have barely changed in recent months, with double-digit earnings growth rates expected in 2017 & 2018. The stock’s relatively fairly-valued based on 2018 numbers (December year-end). I’d hold it for additional capital gains this year.
Quarterly results are scheduled to be reported on the morning of May 9.
Question: What do you think about buying Rite Aid (RAD) in light of the Federal Trade Commission potentially blocking the takeover by Walgreens Boots Alliance (WBA)?
Crista: I’m not going to speculate on whether the merger is ultimately approved or denied. Let’s just examine Rite Aid (RAD) on its own merits. The company reported a small quarterly earnings miss this week. Profits are expected to be $0.01 and $0.08 in 2018 and 2019(February year-end).
RAD is a low-priced stock with very little profit. The company does not have a strong-enough balance sheet to land on my buy list.
Turning to the price chart, I would suggest that you do not attempt to “catch a falling knife”. Any stock that’s fallen this far, and has not been this low in many years, is going to need to stop falling and stabilize for many months before it’s ready to rebound. (And looking forward to December, there will likely be a round of tax-loss selling that dashes any momentum that RAD might accumulate during the next six months.)
If you want profitable small-cap stock ideas, my best suggestion is that you consult Tyler Laundon’s Cabot Small-Cap Confidential.
Question: Do you believe the Mattel (MAT) dividend is sustainable if growth is flat or well below expectations?
Crista: The kinds of situations that would threaten the dividend include boatloads of debt and/or annual net losses. Mattel has very manageable debt, and the net income is on a steady uptrend, so the dividend appears quite safe.
Cabot Small-Cap Confidential
Question: Thanks for your weekly update dated 21 April. In case you missed Aqua Metal’s press release, here’s the link below:
http://investors.aquametals.com/phoenix.zhtml?c=254050&p=irol-newsArticle&ID=2262480
The announcement does not make it clear to me whether additional shares will be issued (possible dilution of share value) to satisfy the purchase price. I look forward to your comments at your convenience.
I want to compliment you on the performance of your portfolio—great going!
Tyler: Thanks for your kind email. The answer is yes, I believe the 123,776 shares used to help fund the acquisition are dilutive, but not by much. As of the end of 2016, the company had 18,878,725 shares outstanding (with a total of 50,000,000 authorized). The new shares amount to 0.65% of current shares outstanding, so not a big impact. There will almost certainly be some other factors increasing the share count in Q1 2017 (options exercise, etc.), but if we just add the Ebonex-issued stock into the mix we wind up with roughly 19 million right now.
Use of stock as currency is one of the things I don’t like about AQMS. But it’s just part of the deal for a young company like this that needs to raise money from all available sources. Hopefully management keeps things in check and the stock’s performance overshadows any dilutive impacts.
As an aside, companies will usually disclose in a press release or 8-K filing if they are using “Treasury stock” to help fund an acquisition. Treasury shares are held when a company buys its own stock back, and they are listed on the balance sheet. If you check out the balance sheet for companies that regularly buy back their own stock (Apple, CVS, etc.) you’ll see what I mean. And if you check out the most recent balance sheet for AQMS, you’ll see they have none listed.
Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks
Question: Just reading your posted Daily Alert on Physician Realty this morning and have two questions. First, abbreviation MSA, I am not familiar with it. Could you tell me what it is or means. Second, abbreviation ABR, same question on what does the abbreviation mean.
I hope to see you at the Cabot Wealth Summit later this year.
Nancy: I apologize for not explaining the acronyms. Sometimes, I miss a few of those. I appreciate the reminder!
An MSA is a Metropolitan Statistical Area, a geographical area of the country that is densely-populated and economically connected. There are 374 in the U.S.
ABR is annual base rent, a calculation used by Real Estate Investment Trusts as a measure of profitability. It equals the rent divided by the lease term.
I hope this helps, and I, too, look forward to seeing you in September.
Question: I’m a new subscriber. I would appreciate it if you could answer the following questions:
1. I noticed that the Investment Index in #792 no longer has quite a few stocks from #791. For example CELG, CDW, C, CNDT and C. Does this mean that this are no longer good investments and have therefore been removed from the Investment Index or that each new issue just covers new ideas?
2. Assuming that each new issue just covers new ideas - will you alert us when the previous investment ideas become a sell?
(I’m a subscriber of Cabot Top 10 and Mike Cintolo removes stocks once they are no longer valid investment ideas—I’m wondering whether you do the same).
Nancy: Welcome aboard, and thank you for subscribing!
The investment index in each newsletter contains only those stocks discussed in that particular issue.
I don’t always update every stock I follow, for two reasons: 1) Many newsletter editors do not issue updates. When they do, I try to catch them (especially the Sell recommendations), and add them to our newsletters. And 2) Since I follow more than 200 newsletters, some of which are published daily, and include a minimum of 70 stocks every month (between both the Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks newsletters, it would be impossible to update every stock. The updates would comprise the entire issue.
As well, we feel the primary purpose of our newsletters is three-fold: 1) To deliver ideas for stocks that are new to our subscribers; and 2) To give you the opportunity to learn about other stocks that may reside in the same sector as some of your holdings (as a point of comparison or a new idea); and 3) To present our contributors’ valuation of stocks you may already own, as a back-up opinion, or as a reason to buy more or to sell.
I hope this gives you some clarification. And please don’t hesitate to request an update of a particular stock. I am in constant touch with our contributors and am happy to follow up with them.